AT&T’s Earnings Rise 26%, Driven by Wireless

The company added a near-record 2.7 million wireless customers in quarter, defying expectations of an iPhone slowdown.

THE ASSOCIATED PRESS

Stung by complaints about dropped calls and slow wireless downloads, AT&T said on Thursday that it could spend an additional $2 billion to improve its network this year.

In the fourth quarter, AT&T added 2.7 million wireless customers, a near record that defined expectations. However, one million were nonphone devices, largely e-book readers. AT&T has deals to support the latest version of the Kindle from Amazon, Sony’s Reader and the Nook from Barnes & Noble.

On Thursday, AT&T executives spent much of a conference call intended to announce fourth-quarter earnings of $3 billion defending the wireless network and detailing how they planned to improve it.

They acknowledged that wireless traffic, particularly from the iPhone, meant that performance in San Francisco and Manhattan were below AT&T’s targets.

AT&T said problems had been reduced in the last three months. And to keep tackling the service issue, it is increasing capital spending this year to $18 billion to $19 billion, from $17.3 billion last year. While it did not say how much would be invested in wireless, it did say the increase over last year would be about $2 billion. It said it would add more cell towers and connect them to faster fiber optic lines.

“Wireless is our No. 1 investment priority,” said John T. Stankey, president and chief executive of AT&T Operations.

An aggressive ad campaign by Verizon attacks the quality and range of AT&T’s network.

The highest-paying customers are those who sign two-year contracts, and AT&T added just 910,000 such customers, compared with 1.2 million at Verizon.

AT&T also said it had activated 3.1 million iPhones, the second-highest quarterly total, demonstrating the continuing allure of the Apple phone. AT&T achieved that despite the lack of a new iPhone model in the quarter.

Craig Moffett, an analyst at Sanford C. Bernstein & Company, called the wireless results “mixed.” He was disappointed by the number of new contracts, and noted that AT&T continued to be very reliant on the iPhone, for which it is the exclusive American carrier.

Apple and AT&T have not said how long their exclusive contract lasts, but Apple appeared to reaffirm its commitment to AT&T on Wednesday, when it announced that AT&T would be the sole United States data provider for its new tablet-style computer, the iPad.

AT&T will offer a new deal for iPad owners, $30 a month for unlimited data service, with no contract. That is half of what data service costs for a laptop, but AT&T is also expecting iPad users to require less data service than laptop users. The iPad will run iPhone applications rather than full-blown and more data-intensive programs.

AT&T, which is based in Dallas, said it earned $3 billion, or 51 cents a share, in the last three months of the year. That was up 26 percent from a year earlier, and matched the average analyst expectation as polled by Thomson Reuters.